One Organization Sells its Assets and Changes its Form

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June 6, 2016; Westchester County Business Journal

For more than 160 years, the nonprofit Aging in America developed and operated living facilities for seniors in and around New York City and its suburbs. Now, it has reportedly decided to retire—but not to give up its mission. Accordingly, it has divested itself of all but three employees and most of its other assets. With the millions of dollars from the sales of its operations, it will make investments and grants to companies that develop technology to help seniors live independently, partnering with other organizations.

“We know that most seniors want to stay at home,” said William Smith, the longtime CEO of Aging in America. “In order for that to happen, technology will have to play a much bigger role than it does today. So we’re looking at that instrument as a possible investment opportunity.”

But behind that decision appears to be an issue of scale, and possibly some other dynamics. The organization was deeply affected by the Great Recession, running into financial challenges. Its endowment shrunk, and increasing labor costs and regulatory requirements made the path forward very unsure.

“The board went through a process for about four years of whether or not we should stay in the business of running a nursing home or sell it before it loses equity and the possibility of going into bankruptcy,” Smith said. “I think we are seeing the beginning of a shrinking of not-for-profit entities, unless they are really huge.”

The nonprofit sold one of its three remaining facilities in 2012 and another in 2014. A third sale is under consideration by the board.

Next year, Aging in America plans to put out requests for proposals for projects, mostly focused in technology, that can help seniors “age in place,” using about $28 million in assets from the sales of those operations. It will also consider making loans to other senior care organizations.

“We think technology will help keep people independent,” Smith said. “We want to empower seniors to take charge of their own destiny.”

This WCBJ article doesn’t mention anything of the approvals process, as what was a direct care facility converts to what now appears to be a foundation/loan fund, but the asset base is relatively small. We are left feeling that this organization was unable to move forward in its traditional business, but is this the best use of its limited remaining assets?

We also wonder how long those assets may last, since a quick look at its 2014 GuideStar 990 returns shows that Smith’s compensation from the nonprofit and its related nursing home facilities totals out at around $825,000, as compared to around $650,000 in 2008, when the operations of the organization were arguably far more complex and more than 90 percent of Smith’s compensation was provided by the nursing homes. That also makes Smith’s compensation as recorded in 2014 higher than that of many foundations and other nonprofits with far larger assets under management. Aging in America is going through a transformation. At the least, the change in its business model would more than justify a new salary survey to update the most recent one performed in 2012.—Ruth McCambridge